Drawing from over two decades of experience in investment management executive search at Jamesbeck, the biggest key differentiator we have seen amongst those in senior leadership roles is Emotional Intelligence, or EQ. The term EQ can have varying interpretations, often nebulous and unspecific. In collaboration with Megan Staczek from Capacity Group, we intend to demystify what EQ is and how you can leverage it more effectively in your workplace.
With investment management firms becoming less siloed and more collaborative internally, the need for leaders with strong EQ is increasingly important in order to bring disparate functions and agendas together. Distribution has become a team sport and to be successful it is required to collaborate across sales, client and consultant relations, product development and specialists, as well as with investment team members to move the ball forward. Investment teams are blending ideas across asset classes and strategies to drive returns and create bespoke solutions for large LPs. Leaders with high EQ are more important than ever to create cohesion and effectiveness across complex organizations.
What is EQ?
There are four core competencies to EQ:¹
- Self-Awareness (do I understand and know my own emotions)
- Self-Management (can I regulate my emotions, stress reactions, etc.)
- Relationship Awareness (the ability to manage relationships, be on a team, and work through conflict effectively)
- Social Awareness (empathy, organizational awareness)
The Impact and Consequences of EQ in Organizations:
When people recount their experiences with their “best boss”, it’s rarely about their technical skills and almost always about the team or learning environment facilitated by the leader. Leaders with high EQ build healthier cultures, foster trusting relationships, and stimulate higher rates of engagement. ² This results in better performance and a healthier bottom line. Volatile leaders drive anxiety and low engagement within their teams.³ The antidote to anxiety, burnout, and disengagement can be found in leaders that promote empathy and EQ within their teams and across the organization.
In the realm of investment management, people are the assets, and the cost of attrition is very high. Cultures with high engagement and a sense of shared purpose are paramount for the retention of employees. Additionally, EQ helps leaders get the most out of their team by identifying the innate strengths of their team members and leveraging their relational awareness to manage those strengths for better results. This is particularly relevant with younger generations, which are less unilaterally driven by compensation and more concerned with mission, culture, philosophy, and learning. Being a leader with high EQ has a direct impact on the outcomes of a firm through the attrition or retention of top talent.
Attrition, Retention, & Attraction of Talent:
The primary reasons we hear people wanting to leave their organization are culture-related, and more specifically a difficult boss or environment. Organizations with low EQ often experience a revolving door of talent, leading to immense cost. Retaining talent and leadership and maintaining engagement (which contributes a 30% differential to the bottom line) are vital in the ongoing war for good talent. Replacing senior talent can take up to a year, if not longer, and it takes time for new hires to get up to speed and become effective in their role. One leading hedge fund manager saw 64% turnover in the last 3 years, with the overwhelming majority of exiters citing siloed team structures and a lack of investment in culture from their leadership as the sole reason for leaving the organization.
Elevating Your Own EQ
So how can you bolster your EQ? Here are some practical ways:
Enhance Emotional Self-Awareness: This is the starting point for getting stronger at EQ and rests on your ability to know the emotion you are feeling. A few key actions you can take include:
- Two or more times a day, pause and focus on what emotion you are experiencing. Can you name it? If not begin to work on building awareness of emotions.
- Watch yourself on zoom to notice how you show up when feeling an emotion or ask for feedback.
Improve Emotional Self-Management: Manage your emotions and reactions. Key steps include:
- Take deep breaths (long inhales, long exhales) to reset your nervous system, a practice that Meg works with many leaders to do several times a day.
- Be intentional about your emotions by choosing how you want to show up emotionally and energetically. Recognize that emotions are valuable when used well. Ensure the right emotion is employed for the right purpose, at the right intensity, and at the right time.
- Pause and give yourself a few minutes before responding, avoid knee-jerk reactions.
- Having coherence between your words and your emotions is really important. People pick up on incongruencies. This is critical to executive presence, and you can be well served by working with a coach on this.
Hone Relationship Management Skills: If you have strong self-awareness and self-management skills, assess how you build and maintain relationships, handle conflict, and react to feedback.
- How are you managing your relationships and network? How do you invest in relationships and not just get right to task?
- Try to notice how you show up in conversations. Do you just talk at people, are you a good listener, do you know what is important to each relationship? Asking for feedback, getting a 360 assessment or working with a coach is very helpful here.
Augment Social Awareness: Leaders must be good at influencing to be effective. This is a higher-level skill and involves understanding yourself, people and the culture.
- Understand how you navigate organizations and influence others. Identify areas of strength and areas for improvement.
- Assess how well you understand the organizational “scorecard” (what does the company value, what does the company reject, what enables success here, how must one operate to be effective). If you are not clear, engage with others on these topics.
- Influence skills are complex as they depend on culture, dynamics, and self-management.
EQ is a crucial skill that leaders must develop to succeed in the evolving investment management landscape. It’s no longer just an added advantage – it is a necessity. By working on your EQ, you can transition from being a good leader to a truly great one. If you’re keen to further discuss EQ and its impact on leadership, please reach out to us at Jamesbeck and/or Capacity Group.
References and Sources:
¹ Our definition of EQ is based on the research of Daniel Coleman, Richard Boyatzis, and Annie McKee.
² An intriguing study of 130 executives found that an executive’s ability to manage their emotions determined their popularity and the degree to which colleagues wished to interact with them.
³ In a study conducted by the Hay Group, “92% of high EQ leaders produced positive climates. 78% of low EQ leaders produced negative climates.”
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Written by:
Melissa Norris, Founding Partner, Jamesbeck
Preston Richard, Senior Associate, Jamesbeck
Megan Staczek, Coach & Consultant, Capacity Group